| ||||||||||||
 | ||||||||||||
| ||||||||||||
| ||||||||||||
 |  |
|
| ||||||||||||||||||||||||||||
|
Automobile Reimbursements - More Tax Free Money
Besides the possibility of a tax-free allowance discussed HERE, another possibility exits to reimburse employees or shareholders for business use of personally owned or leased vehicles.
If the employer is flexible and it appears that the CRA prescribed automobile tax-free allowance rate, discussed HERE, is not adequate to cover actual operating costs incurred by the individual, taxpayers can argue that the business can reimburse actual operating costs which can be tax-free to the recipient and tax-deductible to the business.
Reimbursements can be argued to not be allowances and therefore are non-taxable receipts. At issue is how to measure the reimbursement and the reasonableness of the actual expenses incurred by the individual. This would require a very specific and detailed calculation and which must be supportable with receipts and a detailed mileage log kept by the individual. If you are claiming automobile expenses relating to the use of your vehicle at work, you must maintain a log book indicating the total kilometres you drove in the year and the kilometres you drove to earn employment income. The log book should also contain the date, destination, and the distance traveled for each trip. Make sure that you record the odometer reading of the vehicle at the beginning and end of each year.
For leased vehicles, this option allows the lease costs to be included in the calculation of operating costs to be reimbursed. However, for vehicles which are owned, depreciation on the cost of the vehicle may not qualify as an operating cost and may not therefore be a reimbursable cost. Failure to document properly the mileage and costs incurred may result in CRA disallowing some or all of the tax-free status and including the some or all of the amounts paid into the individual's income. To the extent that the amounts are considered tax-free, the recipient receives the amount tax-free and the payor business may deduct the full amount paid.
Detailed records are required. Click HERE for more.
Careful planning with a Chartered Accountant is warranted. Contact Keith Anderson CA at (780) 447-5830 if you need advice.
|
|
